The Week's Key Events: All Eyes On The ECB

With the US markets closed today, market events this week will be dominated by G10 central bank meetings, among which the ECB stands out, but also notable will be the RBA, BoC and Riksbank. Consensus does not expect policy changes yet. There is also a busy calendar for the UK (PMIs, housing, IP and trade balance) along with GDP/IP releases elsewhere. In EMs, there will be monetary policy meetings in Brazil, Poland and Malaysia. Brazil BCB is expected to cut rates by 100bp.

Central bank preview:

  • The ECB remains trapped between a strong(er) EUR and a rapidly shrinking universe of monetizable bonds; as a result Draghi will emphasize the impact of a strong EUR on inflation dynamics but will refrain from disclosing the destiny of QE after the 2018 expiry. Given the recent EUR appreciation, the ECB will prefer waiting for the September FOMC before committing on QE. Most sellside desks call for the October meeting where BofA expects a 6m QE extension at €40bn/month.
  • The RBA is also expected to remain on hold with communication potentially getting more interesting now that forecasts and Parliamentary testimony are out of the way. On the longer term, the domestic housing market in particular to have a more significant influence on monetary policy with the balance of risks favoring rates up.
  • For the BoC, unexpectedly strong economic growth, below neutral o/n rates and the Fed on a hiking cycle means that the Canada should follow with a hiking cycle as well. This said, low inflation and inflation expectations along with CAD appreciation do not argue for urgency. As a result while some have said the BOC's meeting is "live", most expected the central bank to remain on hold in September and hikes +25bp in October.

In other data:

  • In the US, we get durable & capital goods orders (F), trade balance, ISM non-mfg and multiple Fed speakers in the agenda.
  • In the Eurozone, beyond the ECB, we have retail sales, industrial production and GDP.
  • In the UK, we have PMIs, industrial production, construction output, and trade balance.
  • In Japan, we have monetary base, PMIs, trade balance and final print of Q2 GDP.
  • In Canada, beyond central bank rates decision, we also have labor market report.
  • In Australia, focus is on RBA's rates meeting, while other economic releases include trade balance, retail sales, GDP, home loans and investment lending.

Below is a breakdown of key events by day, courtesy of Deutsche Bank:

  • It’s a quiet start to the week today with Eurozone PPI and the Sentix investor confidence reading the only data of note. With the US closed there is no data scheduled across the pond.
  • Onto Tuesday, Japan and China’s (Caixin) service and composite PMIs are due early in the morning. Then we have UK and Italy’s service and composite PMI for August. There is also the final readings for service and composite PMIs for the Eurozone, Germany and France. Elsewhere, the Eurozone’s retail sales and final readings for 2Q GDP are due. In the US, there is factory orders for July and final readings for durable goods and capital goods orders.
  • Turning to Wednesday, Germany’s factory orders for July is the only data due out. Over in the US, the ISM non-manufacturing PMI, the Fed’s Beige book, trade balance and final Markit services and composite PMI are also due.
  • For Thursday, Germany’s industrial production for July are due along with France’s trade balance and current account balance stats. Elsewhere, house price data in the UK and Q2 GDP (final revision) for the Eurozone is due. This is all before the ECB meeting around midday. Over in the US, there is initial jobless claims, continuing claims and final readings for Q2 nonfarm productivity due.
  • Finally, on Friday, Japan’s trade balance and current account balance along with final readings for 2Q GDP will be due in early morning. China will also release its August import / export stats. In Europe, Germany’s trade balance, current account balance and export / imports stats are due. In the UK and France, industrial production, manufacturing production and trade balance stats are also due. Over in the US, there is the final reading for wholesale inventories along with consumer credit data.

Away from the data, today we’ll have the second round of negotiations for NAFTA in Mexico. On Tuesday US congress returns from the August recess to tackle issues such as the debt ceiling. Elsewhere, Fed Governor Brainard, the Minneapolis Fed President Kashkari and Dallas Fed President Kaplan will speak at separate functions. Turning to Wednesday, UK PM Theresa May will face opposition leader Jeremy Corbyn in parliament and the IMF’s managing director Lagarde will speak at a conference in Korea. President Trump will also meet House Speaker Ryan, Senate Leader McConnell and a few others to discuss the coming debt ceiling. Then onto Thursday, in the UK, Brexit Secretary Davis faces questions in the House of Commons about the state of Brexit talks. In the US, Cleveland Fed President Mester and NY Fed President Dudley are schedule to speak. Elsewhere, the IMF Managing Director Lagarde, BOJ Deputy  Governor and BOK Governor will meet for a two-day conference on growth in Seoul. Finally, on Friday, the Philadelphia Fed President Harker will speak on consumer behaviour in credit.

It is a quieter, holiday-shortened week in the US, where the key economic release this week is ISM non-manufacturing on Wednesday. There are several scheduled speaking engagements by Fed officials this week. Additionally, the Beige Book for the September FOMC period will be released on Wednesday.

Here is a full breakdown of what to expect courtesy of Goldman:

Monday, September 4

  • U.S. Labor Day holiday. US markets are closed, and there will be no major data releases.

Tuesday, September 5

  • 07:30 AM Fed Governor Brainard (FOMC voter) speaks: Federal Reserve Governor Lael Brainard will give a speech on the economic outlook and monetary policy at a breakfast hosted by the Economic Club of New York. There will be a live webcast of the speech, and audience Q&A is expected.
  • 10:00 AM Factory orders, July (GS -3.3%, consensus -3.2%, last +3.0%); Durable goods orders, July final (last -6.8%); Durable goods orders ex-transportation, July final (last +0.5%); Core capital goods orders, July final (last +0.4%); Core capital goods shipments, July final (last +1.0%): We estimate factory orders declined 3.3% in July following a 3.0% increase in June – driven by a decline in commercial aircraft orders. Core measures in the July durable goods report were strong, with better-than-expected growth and upward revisions in core capital goods shipments.
  • 12:30 PM Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will participate in a moderated Q&A at an event hosted by the Carlson School of Management in Minneapolis. Audience Q&A is expected.
  • 01:10 PM Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will also give a speech at a town hall event at the University of Minneapolis. Audience Q&A is expected.
  • 07:00 PM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Fed President Robert Kaplan will participate in a moderated discussion at an event hosted by the Dallas Business Club. Audience and media Q&A is expected.

Wednesday, September 6

  • 10:00 AM ISM non-manufacturing index, August (GS 56.0, consensus 55.5, last 53.9): Regional service sector surveys were stronger on net in August, with notable gains in the New York Fed (+12.4pt to +11.7), Richmond Fed (+10pt to +22), Philly Fed (+8.4pt to +31.8), and Dallas Fed (+4.6pt to +15.1) non-manufacturing surveys. We expect the ISM non-manufacturing index to rebound 2.1pt to 56.0 in the August report following a 3.5pt decline in July. Overall, our non-manufacturing survey tracker rose 2.2pt to 56.3 in August, suggestive of a solid pace of growth in business activity.
  • 08:30 AM Trade balance, July (GS -$44.8bn, consensus -$44.6bn, last -$43.6bn): We estimate the trade deficit widened by $1.2bn in July. The Advance Economic Indicators report last week showed a wider goods trade deficit, and elevated export growth in recent months suggests scope for deterioration in the trade balance.
  • 09:45 AM Markit US services PMI, August final (consensus 56.9, last 56.9)
  • 02:00 PM Beige Book, September FOMC meeting period: The Fed’s Beige book is a summary of regional economic anecdotes from the 12 Federal Reserve districts. The July Beige Book noted that activity expanded across all districts, though the pace of growth varied. Labor markets continued to tighten, and wage pressures had risen since the prior report. In the September Beige Book, we look for additional anecdotes related to the state of consumption, price inflation, and wage growth.

Thursday, September 7

  • 08:30 AM Nonfarm productivity (qoq saar), Q2 final (GS +1.4%, consensus +1.2%, last +0.9%); Unit labor costs, Q2 final (GS +0.1%, consensus +0.4%, last +0.6%): We estimate Q2 non-farm productivity will be revised up in the second vintage by 0.5pp to +1.4%, above the 0.75% trend achieved on average during this expansion. Similarly, we expect Q2 unit labor costs – compensation per hour divided by output per hour –to be revised down by 0.5pp to 0.1% (qoq saar).
  • 08:30 AM Initial jobless claims, week ended September 2 (GS 250k, consensus 242k, last 236k); Continuing jobless claims, week ended August 26 (consensus 1,945k, last 1,942k): We estimate initial jobless claims rose 14k to 250k in the week ended September 2, reflecting a rise in Texas filings related to Hurricane Harvey. Continuing claims – the number of persons receiving benefits through standard programs – have declined in recent weeks, following an early-summer rebound.
  • 12:15 PM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Federal Reserve President Loretta Mester will give a speech on the economic outlook and monetary policy at an event jointly hosted by the Economic Club of Pittsburgh, World Affairs Council, CFA Society of Pittsburgh, and the Association for Financial Professionals. Audience and media Q&A is expected.
  • 07:00 PM New York Fed President Dudley (FOMC voter) speaks: New York Federal Reserve President William Dudley will give a speech titled “The U.S. Economic Outlook and the Implications for Monetary Policy” at an event hosted by the Money Marketeers of New York University. Audience Q&A is expected.
  • 07:00 PM Atlanta Fed President Bostic (FOMC non-voter) speaks: Atlanta Federal Reserve President Raphael Bostic will take part in a moderated Q&A session on his views about the U.S. economy at an event hosted by the Atlanta Fed.
  • 08:15 PM Kansas City Fed President George (FOMC non-voter) speaks: Kansas City Federal Reserve President Esther George will give a speech on the U.S. economy and monetary policy at the Omaha Economic Forum in Omaha, Nebraska. Audience Q&A is expected.

Friday, September 8

  • 8:45 AM Philadelphia Fed President Harker (FOMC voter) speaks: Philadelphia Federal Reserve President Patrick Harker will give a speech on “Consumer Finance Issues” at the New Perspectives on Consumer Behavior in Credit and Payments Markets Conference in Philadelphia.
  • 10:00 AM Wholesale inventories, July final (consensus +0.4%, last +0.6%)
  • 03:00 PM Consumer credit, July (consensus +$15.0bn, last +$12.4bn)

Source: BofA, ING, Goldman, DB